Department store giant Kohl’s raised its full-year 2026 outlook even as Q2 sales dipped 0.9% year over year to $3.3 billion, while digital sales improved over the same period.
The outlook was buoyed in part by approximately $150 million in tariff refunds during the quarter. Despite a rosier outlook, company officials said challenges remain.
“We are operating in a challenging macroeconomic environment where our customers are experiencing persistent financial pressures from inflation and their everyday expenses like gas and food,” said Kohl’s CEO and director Michael Bender, who said the retailer’s mission is to help customers find value.
Comparable sales fell 0.9%, illustrating that demand remains under pressure. But there were bright spots, such as increased customer use of the Kohl’s card and rising digital sales. Kohl’s online sales rose 2.8% in Q2 2026, and the company pointed to increased use of customer-facing artificial intelligence (AI) to help conversion.
Kohl’s Corp. is No. 25 in the Top 1000 Database. The market research tool tracks North America’s largest online retailers, ranking them by annual e-commerce sales and more.
Kohl’s is also No. 473 in Digital Commerce 360’s new AI Rankings. That set of rankings is available in the Top 1000 Pro with AI Database.
Kohl’s digital sales and AI use in Q2
Bender said the company is encouraged by the early signals from AI-assisted shopping.
“Adoption is still small, but customers who engage with our AI shopping assistant are showing stronger conversion and higher revenue per visit,” Bender noted.
He added that Kohl’s sees significant opportunities to expand AI-assisted discovery, gifting and purchase confidence over time.
“The modernization of our digital experience is well underway, with most core customer journeys now on our new platform,” Bender stated.
He assessed that early results have shown “faster page performance and improved customer behavior through product pages, cart and checkout.”
Kohl’s AI assistant, powered by Google’s Gemini technology, launched for the 2026 back-to-school shopping season. That followed an AI shopping tool for Mother’s Day, focused on gift recommendations.
Growth for Kohl’s Marketplace
Jill Timm, chief financial officer at Kohl’s, told analysts during the retailer’s earnings call that its online marketplace also represented a source of growth.
“Our marketplace business continues to grow, up 88% compared to last year, and is becoming a more meaningful contributor to our overall performance,” she said. “Including the marketplace GMV [gross merchandise value] growth, our comparable sales would have improved by 65 basis points and been down 0.2% in Q2.”
Bender also said Kohl’s would be “expanding” its marketplace business going forward, calling it “meaningful” for the company.
“This year, we are more than doubling our selection of marketplace products and vendors, driving relevant category and brand expansion,” he stated.
AI’s relevance for Kohl’s
Experts said Kohl’s embrace of AI is a step in the right direction.
Jessica Murphy, CEO and co-founder of True Fit, a data-driven personalization platform for footwear and apparel retailers, said the conversion and revenue-per-visit gains are the part worth paying attention to, because they suggest the assistant is helping shoppers make a decision rather than just browse longer.
“Those are different things,” she emphasized. “Engagement is easy to generate. Confidence at the moment of decision is not.”
Ultimately, she noted the investment in AI could reap more rewards than the tariff refund the retailer also announced.
“A $150 million refund improves the balance sheet, but it does not change how a customer shops,” she stated. “And when prices rise, the cost of a wrong purchase rises with them.”
What to watch in future Kohl’s results
“In apparel especially, a sale that comes back in three weeks costs more than the sale earned,” Murphy added. “I would not call one quarter a turnaround. But if those gains show up in margin and in what customers keep, the assistant stops being a digital feature and starts becoming part of the operating model.”
Still, Jeremy Bowman, a contributing stock analyst at The Motley Fool covering consumer discretionary and retail, said Kohl’s still has tricky terrain to navigate.
“The AI-powered shopping assistant is a good idea, and it should help solve some of the problems CEO Michael Bender has identified, like customers not being able to find what they’re looking for, but I don’t think it’s enough by itself to turn the business around,” Bowman said.
He said he sees the competition for Kohl’s being dominated by big players with bigger budgets.
“Overall, I think Kohl’s still has a tough hand to play as a legacy retailer,” Bowman said. “It may be one of the last department store chains standing, but that’s not an enviable position when Walmart is cutting prices, and Amazon keeps speeding up deliveries.”
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